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A spatial analysis of incomes and institutional quality: evidence from US metropolitan areas

Published online by Cambridge University Press:  29 April 2015

College of Business and Economics, West Virginia University, Morgantown, WV 26505-6025, USA
College of Business and Economics, West Virginia University, Morgantown, WV 26505-6025, USA
Department of Agricultural and Natural Resource Economics, Department of Economics, & Regional Research Institute, West Virginia University, Morgantown, WV 26506-6825, USA


We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per capita income growth and per capita income levels. We find that economic freedom and per capita income growth and income levels are directly and positively related. Furthermore, we find that the total (direct plus indirect) effects on all metropolitan areas are positive and larger in magnitude than the direct effects alone, indicating that freedom-enhancing reforms in one metropolitan area lead to positive-sum games with neighboring metropolitan areas.

Research Article
Copyright © Millennium Economics Ltd 2015 

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